Tempur-Pedic expects earnings to tumble as much as 50%

Thomas Russell -- Furniture Today, June 6, 2012

LEXINGTON, Ky. — Mattress manufacturer Tempur-Pedic said Wednesday that it expects its second quarter sales to be 3% to 5% below last year's second quarter, and that it expects diluted earnings per share to be as much as 50% down from the same period.

The news sent the company's stock down 40%, to just over $26 per share early Wednesday morning from its Tuesday close of $43.67 per share.

The sales decline is driven by an expected 8% drop in North American sales year over year, the company said. Its second quarter 2011 net sales were $342.2 million, up 30% from the same period in 2010.

The company reported net income of $53.1 million in the second quarter of 2011 compared with $33.5 million in the second quarter of 2010. This translated into diluted earnings of 76 cents per share compared with.46 cents per share in the second quarter of 2010.

The company also predicted its full year net sales for 2012 would total $1.43 billion, down from an April 19 projection of $1.6 billion to $1.65 billion. It now estimates diluted earnings per share to total $2.70 this year, compared with a prior estimate of $3.80 to $3.95.

CEO Mark Sarvary said the news will result in some changes to the company's "expense structure."

"Sales trends in our North America business during the second quarter have been disappointing and below plan, primarily due to changes in the competitive environment, including an unprecedented number of new competitive product introductions which have been supported by aggressive marketing and promotion," Sarvary said in a statement.

"As a result, we are projecting lower sales than previously anticipated for the rest of the year and are taking actions to realign our expense structure appropriately. However, we remain very confident in our company's growth potential and our strong brand, and as a result remain committed to our long-term strategic plan," he said.

Dale Williams, chief financial officer, said that the international business continues to perform well, but that third and fourth quarter sales in North America could continue to mirror second quarter sales activity in the region.

"In light of the current environment for North American sales, our guidance assumes that North American sales for the third and fourth quarters will each be approximately equal to the second quarter sales factoring in modest seasonality," he said in a statement.